Lesaka Technologies Sees 55% Growth in Adjusted EBITDA

Significant Growth for Lesaka Technologies

Lesaka Technologies (NASDAQ: LSK) has recently revealed stellar financial results, marking a noteworthy year-over-year growth. The company reported an extraordinary 55% increase in adjusted EBITDA, now totaling ZAR691 million. They transitioned from a ZAR275 million loss in the previous fiscal year to a profit of ZAR67 million in FY 2024. This turnaround highlights not only the resilience of Lesaka but also their strategic financial management.

Financial Highlights

The CEO, Steve Heilbron, underscored the successful acquisitions of Touchsides and the imminent addition of Adumo. These moves are pivotal for reinforcing Lesaka's leadership position as an independent fintech innovator in Southern Africa.

Key Financial Takeaways

• Lesaka’s strong performance includes a 55% rise in adjusted EBITDA and a net profit of ZAR67 million.
• The significant improvement in the net debt to adjusted EBITDA ratio, which has decreased from 4.5 times to just 2.5 times.
• The merchant division’s core revenue streams—the merchant solutions and payment systems—showed robust growth across various segments.
• New product launches, including innovations like Fuel Connect and a secure vault service for micro merchants, have expanded their market offerings.
• In the consumer sector, Lesaka reported a 75% increase in gross activations for permanent grant recipients and a 32% growth in their lending portfolio.
• Operating cash flow in Q4 rose by 21%, leading to a substantial net cash flow of ZAR538 million for the year.

Lesaka's Strategic Outlook

As Lesaka sets its sights on FY 2025, the company anticipates continued growth driven by enhanced lending performance and deepened customer engagement. Their revenue is projected to fall between ZAR10 billion and ZAR11 billion, with group-adjusted EBITDA expected in the range of ZAR900 million to ZAR1 billion.

Growth Projections

• Lesaka aims for an ongoing net debt to EBITDA ratio around 2 times.
• Medium-term financial objectives will be updated soon, providing investors with clarity on expected growth trajectories.
• Strategic initiatives are set to further the organization’s foothold in the fintech space, targeting both micro and traditional merchant segments.

Challenges and Opportunities

Despite these successes, Lesaka acknowledges challenges faced by their credit business due to fluctuating economic conditions impacting credit scores. However, the quality of their portfolio remains high, demonstrating effective risk management despite slightly reduced book size.

Positive Developments

• Merchant revenue enjoyed a year-on-year increase of 10%, while total revenues rose by 12% to a remarkable $624 million.
• In Q4, the consumer division achieved an astounding 94% year-on-year rise in adjusted EBITDA.
• The company maintains a notably high premium collection rate and a low lapse ratio in its insurance offerings.

Missed Opportunities

Recently, Lesaka suspended the Kazang Pay Advance service for micro merchants, with plans for a controlled pilot relaunch next fiscal year. This approach aligns with their strategy of careful and purposeful product management.

Questions and Strategic Insights

In their Q&A session, the management committed to a disciplined approach towards maintaining a 2:1 leverage ratio. They expressed optimism about further enhancing financial health through careful acquisitions and financial strategies.

Conclusion

With the integration of new acquisitions and a focus on value-added services, Lesaka Technologies is well-positioned to lead in the fintech arena. Their commitment to enhancing customer experience and operational efficiency reflects a strong foundation for sustainable growth.

Frequently Asked Questions

What is Lesaka Technologies' recent financial performance?

Lesaka Technologies reported a 55% increase in adjusted EBITDA, transitioning to a profit of ZAR67 million after a loss the previous year.

What are the projections for FY 2025?

The company expects revenue between ZAR10 billion and ZAR11 billion and group adjusted EBITDA between ZAR900 million and ZAR1 billion.

How are acquisitions impacting Lesaka?

Acquisitions like Touchsides and Adumo are enhancing Lesaka’s market presence and product offerings, driving future growth.

What challenges is Lesaka facing?

The credit business faces some hurdles due to economic factors affecting credit scores but maintains a high-quality portfolio.

How is Lesaka managing its debt?

The company is focused on maintaining a net debt to EBITDA ratio around 2 times and is actively working on reducing overall debt levels.

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